February jobs reports explained and why they confirm recession in 2013, despite the positive media headlines

Bad news on the jobs front again in February. 
Total wages continue their relentless decline. 
Increasingly people are having to do 2 or 3 poorly paid part time jobs to make ends meet, because well paying jobs just aren't out there. 

Those who track the quality composition of the jobs, as opposed to just the quantity, will know that the part and full-time jobs breakdown has long been a major issue. 

The number of people now doing part time work rose by a massive 459,000 from January to February. 
This is a combination of factors : -
Some of the unemployed have settled for part time work, because they could not find full time employment.
Full time workers have been put on short working time because demand isn't there to employ them full time.
Employers are increasingly using part time (and temporary) labor to avoid paying additional benefits.

The total number of full time + part time jobs increased by circa 170,000 NOT the media headline of 236,000 (see Appendix 3).  

From this we can surmise that the number of full time jobs DECLINED by around 289,000 from January to February. 

Total wages MASSIVELY declined between January and February and is strongly recessionary.

A back of the envelope calculation for total wages from the available data says that annual TOTAL WAGES declined by circa $3.5bn in February alone (on supposedly very good jobs numbers). 
This is an annualized rate of $42bn a year. 
See Appendix 2. 

But things are set to get much worse than this. 
Disposable incomes, even for those still in well paid employment, are declining very significantly.
See Appendix 4

Looking behind the data in the February job number headlines, the ONLY conclusion one can reach is that the US economy is SLOWING DOWN and entering a recession. 


The solutions to start fixing America's economic problems are obvious.

Cut Corporate Welfare by $1.3tn+ a year and give huge tax breaks to middle earners and below to INCREASE disposable incomes and INCREASE job growth.

http://ian56.blogspot.co.uk/2013/03/cbo-projections-of-future-gdp-growth.html

NEITHER party is even contemplating these measures. 
They would somewhat harm the profits of their large Corporate sponsors. 

But just as in 1914 when Henry Ford doubled the wages of his workers overnight in very similar economic conditions to today - the disposable incomes of his workers DRAMATICALLY improved and pretty soon so did Henry Ford's profits.  



Appendices 

(1) The actual BLS employment reports 

http://www.bls.gov/news.release/empsit.nr0.htm

The more interesting full details of the Household survey
http://www.bls.gov/news.release/empsit.a.htm


(2) Assumptions used in the back of the envelope calculations for Total Wages

The average part time job gained was 25 hours per week at close to minimum wages (I have been generous and assumed $10 an hour here).
Total wage increase $12,500 per job X 459,000 new jobs = $5,737 million

The average full time job lost paid median wages of $32,000 (again this is being generous as the full time jobs being lost are more likely to have been paying higher than median wages than below - as per the current trend over the last few years).
Total wage decrease $32,000 X 289,000 jobs lost = $9,248 million 

The net annual decrease in February was circa $3.5bn ($9.2bn minus $5.7bn). 
If February was repeated for the next year total wages would decline by $42bn. 


(3) The disparity between the business establishment and the household surveys explained

The business establishment survey reported a 236,000 increase in the number of jobs. 
The household survey only reported a 170,000 increase. 

Most of the difference of 66,000 can be explained thus :- 

(3.1) January business survey
The January business survey was adjusted downwards by 38,000 (157,000 to 119,000). 
February's numbers were pumped up by the same amount.

(The Business Establishment survey for previous months is almost ALWAYS adjusted downwards so that double counting of some new job creation can be applied for the media headlines.) 

(3.2) The BLS Birth Death Model 
Magically 11,000 more jobs were created in February 2013 than February 2012 by the Birth Death model. 
We would expect a decline in the number of jobs for new/expired businesses in February 2013 compared to 2012 due to a slowing economy. 

1st Quarter 2012  GDP growth was 2.2%. 
4th Quarter 2012 GDP growth was reported as 0.1% (an exaggerated decline mostly due to a difference in timing of defense contracts - much higher than average in Q3 2012 and much lower than average in Q4 2012). 

Taking the average of 3rd and 4th Qtrs to take the defense spending timing anomalies out gives a GDP growth of 1% for the 2nd half of 2012. 

1st Qtr GDP growth was 2.2%, 2nd Qtr was 1.3%. We have a well established trend of a SLOWING economy. 

Without anything else we might expect 1st Qtr 2013 GDP growth to be eventually reported as somewhere around 0.5%. I.E. 1.7% LOWER than 1st Qtr 2012. 

We should expect 1st Qtr GDP growth to be reported in the 0.0% to 0.5% range - taking into account other things.


(4) The decline in disposable incomes

We HAVE got other economic factors that we already know about.
And they are all BAD for the economy. 
The Fiscal Cliff handed out a huge $200bn annual tax hike to the middle class and below in early January.
We are seeing very high rates of inflation in things like food & gas (almost entirely due to the Federal Reserve's policy of increasing the rate of Fed pumping from $540bn a year prior to November to $1tn now). 
True inflation is now around 9%. 
(This is cpi as measured by the model in place in 1980, without government fiddles since then, to reduce the headline rate of inflation to the official current circa 2%.)  

Disposable incomes for those keeping an "inflation adjusted" job or on fixed incomes/benefits (seniors etc.) have GREATLY DECLINED since the start of 2013. 

There is a lot of scaremongering of the trivial amount of money in the sequester by the politicians and the media. 
The politicians have set about applying the sequester in the worst possible way by maximising job losses and furloughs where ever they can. This is to garner a public outcry against the sequester so that eventually almost no cuts to future planned increases are made. 

Much more importantly, the sequester scaremongering, is to divert public attention from the $1.3tn+ of annual Corporate Welfare that could be easily cut. 

New businesses will be less likely to be started up in the current economic climate and old businesses more likely to be wound up. 
We would expect a pretty significant DECREASE for jobs in the Birth/Death model for February 2013 compared to February 2012, not the reported 11,000 increase. 

N.B. The Birth/Death model statistics are notoriously unreliable and wildly over stated as the economy goes into recessionary conditions (as I believe we are now are).    

(5) The recession of 2013

The recession of 2013 will be caused by 3 main factors :- 

Current government economic policy which is lowering disposable incomes and decreasing job growth

Current Federal Reserve policy of massive monetary pumping. This is also actively LOWERING future GDP growth NOT increasing it, by lowering disposable incomes of 99% of the population. 
See :- http://ian56.blogspot.co.uk/2013/01/the-2tn-of-excess-bank-reserves-is.html

Europe's deepening recession due to their massive debts.

At some point in the near future, Europe's debt problems will blow up again (absolutely nothing has been to fix them since they first started being reported in 2009). 
I am expecting the reporting of French big banks being in trouble, i.e. insolvent, as the next major piece of news out of Europe at some point this year. 

(6) Other bad signs for the future in the job number statistics 

The most surprising development in February from a quality standpoint was that the number of multiple job-holders rose by a massive 340K, which is a record. 

Increasingly more people are having to hold down 2 or 3 poorly paid part time jobs to make ends meet. 

Increasingly the over 54's are having to remain in at least part time employment to make ends meet.
Increasingly the over 65's are having to do a part time job, because their pensions are not sufficient to maintain a liveable income. 

Both of these are taking away employment prospects from the young. 
The teenage unemployment rate ROSE by 1.7% in February. 

Since the start of 2009 4 million over 54's are now in employment. 
Since the start of 2009 1 million FEWER under 55's are now in employment.